Why does Edith Wharton choose to use a framing device for her narrative?
Good question, but I'd rephrase it. If we ask "why," we can get stuck speculating about her psychology, and the reasoning behind it. However, if we ask "What is the effect of doing so?" and "How does a framing device fit the story?" we can make it into questions we can answer.
Any framing device distances readers from the story. It slows down their entry into it. Well, this is a story in which emotional distance (and overcoming it) is central, so the frame builds that in to the reader's experience. (We're even told that Frome's face looks "unapproachable.")
Now, turn to the way the story is introduced: the narrator has to piece it together from bits and pieces after the fact—long after, and through the eyes of locals that are seen by an outside party. The narrator is frustrated, and this creates a felt understanding of Ethan's situation, and of what it means to live through those harsh winters. The result is that the reader is predisposed to read the story in specific ways through the frame; it provides a "lens" for the story.
In response to the last answer, allow me to agree, though I'd twist the answer slightly. I'm not sure that it makes the narrator more reliable, but it does allow us to see the problems with the narrator's tale much easier.
For instance, when Ethan and Mattie have dinner, my favorite paragraph says how she "seemed fuller" and overall, becomes incredibly attractive...just because she had a red bow in her hair. The narrator doesn't take issue with the sudden change in appearance, but merely presenting it to the reader allows us the chance to question how Ethan could see her that much more sexual, just because of a single red ribbon.
Perhaps it's more reliable because it highlights peculiar passages. I don't wish to misspeak and put words in someone's mouth, but that's plausible.
In addition to the other response, I always point out to my students that this also makes the narrator more reliable. Edith Wharton was a well-educated, articulate, upperclass woman, and Starkfield is a rural town and Ethan Frome, though having some education, is poor and quite inarticulate. Creating a narrator from outside of Starkfield who comes in and pieces together the story of the Fromes allows us to trust the descriptive, articulate tale that is woven within the chapters of the text.
This literary technique is used as the same significant element at the beginning of the story to the end of it. This repeated elements creates bits and pieces from the book and put it all together to form a tight "frame" which the main thesis and the plot can work out in a detailed manner. It is to hold the story together and provide some literary context, to create some interest to the readers and to create some resolution to the entire story. This type of method is to create suspense and mystery.